Medicare Program; Inpatient Rehabilitation Facility Prospective Payment System for. AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

Transcription

1 This document is scheduled to be published in the Federal Register on 08/03/2017 and available online at and on FDsys.gov DEPARTMENT OF HEALTH AND HUMAN SERVICES Centers for Medicare & Medicaid Services 42 CFR Part 412 [CMS-1671-F] RIN 0938-AS99 Medicare Program; Inpatient Rehabilitation Facility Prospective Payment System for Federal Fiscal Year 2018 AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS. ACTION: Final rule. SUMMARY: This final rule updates the prospective payment rates for inpatient rehabilitation facilities (IRFs) for federal fiscal year (FY) 2018 as required by the statute. As required by section 1886(j)(5) of the Social Security Act (the Act), this rule includes the classification and weighting factors for the IRF prospective payment system s (IRF PPS) case-mix groups and a description of the methodologies and data used in computing the prospective payment rates for FY This final rule also revises the International Classification of Diseases, 10th Revision, Clinical Modification (ICD-10-CM) diagnosis codes that are used to determine presumptive compliance under the 60 percent rule, removes the 25 percent payment penalty for inpatient rehabilitation facility patient assessment instrument (IRF-PAI) late transmissions, removes the voluntary swallowing status item (Item 27) from the IRF-PAI, summarizes comments regarding the criteria used to classify facilities for payment under the IRF PPS, provides for a subregulatory process for certain annual updates to the presumptive methodology diagnosis code lists, adopts the use of height/weight items on the IRF-PAI to determine patient body mass index (BMI) greater than 50 for cases of single-joint replacement under the presumptive methodology, and revises and updates measures and reporting requirements under the IRF quality reporting

2 CMS-1671-F 2 program (QRP). DATES: Effective Dates: These regulations are effective on October 1, Applicability Dates: The updated IRF prospective payment rates are applicable for IRF discharges occurring on or after October 1, 2017, and on or before September 30, 2018 (FY 2018). All other changes discussed in this final rule, including the revisions to the ICD-10- CM diagnosis codes that are used to determine presumptive compliance under the 60 percent rule, removal of the 25 percent payment penalty for IRF-PAI late transmissions, removal of the voluntary swallowing status item (Item 27) from the IRF-PAI, provision for a subregulatory process for certain annual updates to the presumptive methodology diagnosis code lists, use of height/weight items on the IRF-PAI to determine patient BMI greater than 50 for cases of singlejoint replacement under the presumptive methodology, and the updated measures and reporting requirements under the IRF QRP, are applicable for IRF discharges occurring on or after October 1, FOR FURTHER INFORMATION CONTACT: Gwendolyn Johnson, (410) , for general information. Catie Kraemer, (410) , for information about the wage index. Kadie Derby, (410) , or Susanne Seagrave, (410) , for information about the payment policies and payment rates. Christine Grose, (410) , for information about the quality reporting program. SUPPLEMENTARY INFORMATION: The IRF PPS Addenda along with other supporting documents and tables referenced in this final rule are available through the Internet on the CMS website at Payment/InpatientRehabFacPPS/index.html.

3 CMS-1671-F 3 Executive Summary A. Purpose This final rule updates the prospective payment rates for IRFs for FY 2018 (that is, for discharges occurring on or after October 1, 2017, and on or before September 30, 2018) as required under section 1886(j)(3)(C) of the Act. As required by section 1886(j)(5) of the Act, this rule includes the classification and weighting factors for the IRF PPS s case-mix groups and a description of the methodologies and data used in computing the prospective payment rates for FY This final rule also revises the ICD-10-CM diagnosis codes that are used to determine presumptive compliance under the 60 percent rule, removes the 25 percent payment penalty for IRF-PAI late transmissions, removes the voluntary swallowing status item (Item 27) from the IRF-PAI, provides for a subregulatory process for certain annual updates to the presumptive methodology diagnosis code lists, summarizes comments regarding the criteria used to classify facilities for payment under the IRF PPS, adopts the use of height/weight items from the IRF- PAI to determine patient BMI greater than 50 for cases of lower extremity single joint replacement under the presumptive methodology, and revises and updates the measures and reporting requirements under the IRF QRP. B. Summary of Major Provisions In this final rule, we use the methods described in the FY 2017 IRF PPS final rule (81 FR 52056) to update the prospective payment rates for FY 2018 using updated FY 2016 IRF claims and the most recent available IRF cost report data, which is FY 2015 IRF cost report data. (Note: In the interest of brevity, the rates previously referred to as the Federal prospective payment rates are now referred to as the prospective payment rates. No change in meaning is intended.) We are also finalizing revisions and updates to the quality measures and reporting requirements under the IRF QRP.

4 CMS-1671-F 4 C. Summary of Impacts Provision Description FY 2018 IRF PPS payment rate update Provision Description New quality reporting program requirements Transfers The overall economic impact of this final rule is an estimated $75 million in increased payments from the Federal government to IRFs during FY Costs The total reduction in costs in FY 2018 for IRFs for the new quality reporting requirements is estimated to be $2.6 million. To assist readers in referencing sections contained in this document, we are providing the following Table of Contents. Table of Contents I. Background A. Historical Overview of the IRF PPS B. Provisions of the PPACA Affecting the IRF PPS in FY 2012 and Beyond C. Operational Overview of the Current IRF PPS D. Advancing Health Information Exchange II. Summary of Provisions of the Proposed Rule III. Analysis and Responses to Public Comments IV. Update to the Case-Mix Group (CMG) Relative Weights and Average Length of Stay Values for FY 2018 V. Facility-Level Adjustment Factors VI. FY 2018 IRF PPS Payment Update A. Background B. FY 2018 Market Basket Update and Productivity Adjustment C. Labor-Related Share for FY 2018 D. Wage Adjustment

5 CMS-1671-F 5 E. Description of the IRF Standard Payment Conversion Factor and Payment Rates for FY 2018 F. Example of the Methodology for Adjusting the Prospective Payment Rates VII. Update to Payments for High-Cost Outliers under the IRF PPS A. Update to the Outlier Threshold Amount for FY 2018 B. Update to the IRF Cost-to-Charge Ratio Ceiling and Urban/Rural Averages VIII. Removal of the 25 Percent Payment Penalty for IRF-PAI Late Submissions IX. Removal of the Voluntary Item 27 (Swallowing Status) from the IRF-PAI X. Refinements to the Presumptive Compliance Methodology ICD-10-CM Diagnosis Codes A. Background on the IRF 60 Percent Rule B. Enforcement of the IRF 60 Percent Rule C. Background on the Use of ICD-10-CM Diagnosis Codes in the Presumptive Compliance Method D. Changes to the Presumptive Methodology Diagnosis Code List E. Revisions Involving Traumatic Brain Injury and Hip Fracture Codes F. Revisions Regarding Major Multiple Trauma Codes G. Further examination of Unspecified Codes and Arthritis Codes H. Further examination of ICD-10-CM Code G72.89 Other Specified Myopathies I. Implementation of the Revisions to the Presumptive Methodology J. Summary of Comments Regarding the Criteria Used to Classify Facilities for Payment Under the IRF PPS XI. Subregulatory Process for Certain Updates to Presumptive Methodology Diagnosis Code Lists XII. Use of IRF-PAI Data to Determine Patient Body Mass Index (BMI) Greater Than 50 for

6 CMS-1671-F 6 Cases of Lower Extremity Single Joint Replacement XIII. Revisions and Updates to the IRF Quality Reporting Program (QRP) A. Background and Statutory Authority B. General Considerations Used for Selection of Quality Measures for the IRF QRP C. Collection of Standardized Patient Assessment Data under the IRF QRP D. Policy for Retaining IRF QRP Measures and Application of That Policy to Standardized Patient Assessment Data E. Policy for Adopting Changes to IRF QRP Measures and Application of that Policy to Standardized Patient Assessment Data F. Quality Measures Currently Adopted for the IRF QRP G. IRF QRP Quality Measures Beginning with the FY 2020 IRF QRP H. Removal of the All-Cause Unplanned Readmission Measure for 30 Days Post- Discharge from IRFs from the IRF QRP I. IRF QRP Quality Measures under Consideration for Future Years J. Standardized Patient Assessment Data Reporting for the IRF QRP K. Form, Manner, and Timing of Data Submission Under the IRF QRP L. Application of the IRF QRP Submission Requirements and Payment Impact to the Standardized Patient Assessment Data Beginning with the FY 2019 IRF QRP M. Application of the IRF QRP Exception and Extension Requirements to the Submission of Standardized Patient Assessment Data Beginning with the FY 2019 IRF QRP N. Application of the IRF QRP Data Completion Thresholds to the Submission of Standardized Patient Assessment Data Beginning with the FY 2019 IRF QRP O. Policies Regarding Public Display of Measure Data for the IRF QRP P. Mechanism for Providing Feedback Reports to IRFs

7 CMS-1671-F 7 Q. Method for Applying the Reduction to the FY 2018 IRF Increase Factor for IRFs That Fail to Meet the Quality Reporting Requirements XIV. Miscellaneous Comments XV. Provisions of the Final Regulations XVI. Collection of Information Requirements A. Statutory Requirement for Solicitation of Comments B. Collection of Information Requirements for Updates Related to the IRF QRP XVII. Regulatory Impact Statement Regulation Text Acronyms, Abbreviations, and Short Forms Because of the many terms to which we refer by acronym, abbreviation, or short form in this final rule, we are listing the acronyms, abbreviation, and short forms used and their corresponding terms in alphabetical order. The Act AHA AHRQ ASAP ASCA The Social Security Act American Hospital Association Agency for Healthcare Research and Quality Assessment Submission and Processing The Administrative Simplification Compliance Act of 2002 (Pub. L , enacted on December 27, 2002) ASPE BIMS BiPAP BLS BMI Office of the Assistant Secretary for Planning and Evaluation Brief Interview for Mental Status Bilevel Positive Airway Pressure U.S. Bureau of Labor Statistics Body Mass Index

8 CMS-1671-F 8 CAM CARE CAUTI CBSA CCR CDI CMG CMS CPAP CY DRA Confusion Assessment Method Continuity Assessment Record and Evaluation Catheter-Associated Urinary Tract Infection Core-Based Statistical Area Cost-to-Charge Ratio Clostridium difficile Infection Case-Mix Group Centers for Medicare & Medicaid Services Continuous Positive Airway Pressure Calendar year Deficit Reduction Act of 2005 (Pub. L , enacted on February 8, 2006) DSH DTI FFS FISS FR FY GAO GEMS HHA HHS HIPAA Disproportionate Share Hospital Deep Tissue Injury Fee-for-Service Fiscal Intermediary Shared System Federal Register Federal Fiscal Year Government Accountability Office General Equivalence Mapping Home Health Agency U.S. Department of Health and Human Services Health Insurance Portability and Accountability Act of 1996 (Pub. L , enacted on August 21, 1996)

9 CMS-1671-F 9 ICD-9-CM International Classification of Diseases, 9th Revision, Clinical Modification ICD-10-CM International Classification of Diseases, 10th Revision, Clinical Modification IGC IGI Impairment Group Code IHS Global Insight IMPACT Act Improving Medicare Post-Acute Care Transformation Act of 2014 (Pub. L , enacted on October 6, 2014) IPPS IRF IRF-PAI IRF PPS IRF QRP IRVEN IV LIP LTCH Inpatient prospective payment system Inpatient Rehabilitation Facility Inpatient Rehabilitation Facility-Patient Assessment Instrument Inpatient Rehabilitation Facility Prospective Payment System Inpatient Rehabilitation Facility Quality Reporting Program Inpatient Rehabilitation Validation and Entry Intravenous Low-Income Percentage Long-Term Care Hospital MA Medicare Advantage (formerly known as Medicare Part C) MAC Medicare Administrative Contractor MACRA Medicare Access and CHIP Reauthorization Act of 2015 (Pub. L , enacted on April 16, 2015) MAP MedPAC MFP Measures Application Partnership Medicare Payment Advisory Commission Multifactor Productivity

10 CMS-1671-F 10 MMSEA Medicare, Medicaid, and SCHIP Extension Act of 2007 (Pub. L , enacted on December 29, 2007) MRSA MSPB NCHS NHSN NPUAP NQF OMB ONC Methicillin-Resistant Staphylococcus aureus Medicare Spending Per Beneficiary National Center for Health Statistics National Healthcare Safety Network National Pressure Ulcer Advisory Panel National Quality Forum Office of Management and Budget Office of the National Coordinator for Health Information Technology OPPS/ASC Outpatient Prospective Payment System/Ambulatory Surgical Center PAC PAC/LTC PAI PHQ Post-Acute Care Post-Acute Care/Long-Term Care Patient Assessment Instrument Patient Health Questionnaire PPACA Patient Protection and Affordable Care Act (Pub. L , enacted on March 23, 2010) PPR PPS PRA Potentially Preventable Readmissions Prospective Payment System Paperwork Reduction Act of 1995 (Pub. L , enacted on May 22, 1995) QIES Quality Improvement Evaluation System

11 CMS-1671-F 11 QRP RIA RIC RFA Quality Reporting Program Regulatory Impact Analysis Rehabilitation Impairment Category Regulatory Flexibility Act (Pub. L , enacted on September 19, 1980) RN RPL RTI International SME SNF SODF SSI TEP TPN Registered Nurse Rehabilitation, Psychiatric, and Long-Term Care Research Triangle Institute International Subject Matter Experts Skilled Nursing Facility Special Open Door Forum Supplemental Security Income Technical Expert Panel Total Parenteral Nutrition I. Background A. Historical Overview of the IRF PPS Section 1886(j) of the Act provides for the implementation of a per-discharge prospective payment system (PPS) for inpatient rehabilitation hospitals and inpatient rehabilitation units of a hospital (collectively, hereinafter referred to as IRFs). Payments under the IRF PPS encompass inpatient operating and capital costs of furnishing covered rehabilitation services (that is, routine, ancillary, and capital costs), but not direct graduate medical education costs, costs of approved nursing and allied health education activities, bad debts, and other services or items outside the scope of the IRF PPS. Although a complete discussion of the IRF PPS provisions appears in the original FY 2002 IRF PPS final rule (66 FR 41316) and the FY 2006 IRF PPS final rule

12 CMS-1671-F 12 (70 FR 47880), we are providing a general description of the IRF PPS for FYs 2002 through Under the IRF PPS from FY 2002 through FY 2005, the prospective payment rates were computed across 100 distinct case-mix groups (CMGs), as described in the FY 2002 IRF PPS final rule (66 FR 41316). We constructed 95 CMGs using rehabilitation impairment categories (RICs), functional status (both motor and cognitive), and age (in some cases, cognitive status and age may not be a factor in defining a CMG). In addition, we constructed five special CMGs to account for very short stays and for patients who expire in the IRF. For each of the CMGs, we developed relative weighting factors to account for a patient s clinical characteristics and expected resource needs. Thus, the weighting factors accounted for the relative difference in resource use across all CMGs. Within each CMG, we created tiers based on the estimated effects that certain comorbidities would have on resource use. We established the federal PPS rates using a standardized payment conversion factor (formerly referred to as the budget-neutral conversion factor). For a detailed discussion of the budget-neutral conversion factor, please refer to our FY 2004 IRF PPS final rule (68 FR through 45685). In the FY 2006 IRF PPS final rule (70 FR 47880), we discussed in detail the methodology for determining the standard payment conversion factor. We applied the relative weighting factors to the standard payment conversion factor to compute the unadjusted prospective payment rates under the IRF PPS from FYs 2002 through Within the structure of the payment system, we then made adjustments to account for interrupted stays, transfers, short stays, and deaths. Finally, we applied the applicable adjustments to account for geographic variations in wages (wage index), the percentage of low-income patients, location in a rural area (if applicable), and outlier payments (if applicable) to the IRFs unadjusted prospective payment rates.

13 CMS-1671-F 13 For cost reporting periods that began on or after January 1, 2002, and before October 1, 2002, we determined the final prospective payment amounts using the transition methodology prescribed in section 1886(j)(1) of the Act. Under this provision, IRFs transitioning into the PPS were paid a blend of the federal IRF PPS rate and the payment that the IRFs would have received had the IRF PPS not been implemented. This provision also allowed IRFs to elect to bypass this blended payment and immediately be paid 100 percent of the federal IRF PPS rate. The transition methodology expired as of cost reporting periods beginning on or after October 1, 2002 (FY 2003), and payments for all IRFs now consist of 100 percent of the federal IRF PPS rate. We established a CMS website as a primary information resource for the IRF PPS which is available at Payment/InpatientRehabFacPPS/index.html. The website may be accessed to download or view publications, software, data specifications, educational materials, and other information pertinent to the IRF PPS. Section 1886(j) of the Act confers broad statutory authority upon the Secretary to propose refinements to the IRF PPS. In the FY 2006 IRF PPS final rule (70 FR 47880) and in correcting amendments to the FY 2006 IRF PPS final rule (70 FR 57166) that we published on September 30, 2005, we finalized a number of refinements to the IRF PPS case-mix classification system (the CMGs and the corresponding relative weights) and the case-level and facility-level adjustments. These refinements included the adoption of the Office of Management and Budget s (OMB) Core-Based Statistical Area (CBSA) market definitions, modifications to the CMGs, tier comorbidities, and CMG relative weights, implementation of a new teaching status adjustment for IRFs, revision and rebasing of the market basket index used to update IRF payments, and updates to the rural, low-income percentage (LIP), and high-cost

14 CMS-1671-F 14 outlier adjustments. Beginning with the FY 2006 IRF PPS final rule (70 FR through 47917), the market basket index used to update IRF payments was a market basket reflecting the operating and capital cost structures for freestanding IRFs, freestanding inpatient psychiatric facilities, and long-term care hospitals (LTCHs) (hereinafter referred to as the rehabilitation, psychiatric, and long-term care (RPL) market basket). Any reference to the FY 2006 IRF PPS final rule in this final rule also includes the provisions effective in the correcting amendments. For a detailed discussion of the final key policy changes for FY 2006, please refer to the FY 2006 IRF PPS final rule (70 FR and 70 FR 57166). In the FY 2007 IRF PPS final rule (71 FR 48354), we further refined the IRF PPS casemix classification system (the CMG relative weights) and the case-level adjustments, to ensure that IRF PPS payments would continue to reflect as accurately as possible the costs of care. For a detailed discussion of the FY 2007 policy revisions, please refer to the FY 2007 IRF PPS final rule (71 FR 48354). In the FY 2008 IRF PPS final rule (72 FR 44284), we updated the prospective payment rates and the outlier threshold, revised the IRF wage index policy, and clarified how we determine high-cost outlier payments for transfer cases. For more information on the policy changes implemented for FY 2008, please refer to the FY 2008 IRF PPS final rule (72 FR 44284), in which we published the final FY 2008 IRF prospective payment rates. After publication of the FY 2008 IRF PPS final rule (72 FR 44284), section 115 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (Pub. L , enacted on December 29, 2007) (MMSEA), amended section 1886(j)(3)(C) of the Act to apply a zero percent increase factor for FYs 2008 and 2009, effective for IRF discharges occurring on or after April 1, Section 1886(j)(3)(C) of the Act required the Secretary to develop an increase factor to update the IRF prospective payment rates for each FY. Based on the legislative change

15 CMS-1671-F 15 to the increase factor, we revised the FY 2008 prospective payment rates for IRF discharges occurring on or after April 1, Thus, the final FY 2008 IRF prospective payment rates that were published in the FY 2008 IRF PPS final rule (72 FR 44284) were effective for discharges occurring on or after October 1, 2007, and on or before March 31, 2008, and the revised FY 2008 IRF prospective payment rates were effective for discharges occurring on or after April 1, 2008, and on or before September 30, The revised FY 2008 prospective payment rates are available on the CMS website at Payment/InpatientRehabFacPPS/Data-Files.html. In the FY 2009 IRF PPS final rule (73 FR 46370), we updated the CMG relative weights, the average length of stay values, and the outlier threshold; clarified IRF wage index policies regarding the treatment of New England deemed counties and multi-campus hospitals; and revised the regulation text in response to section 115 of the MMSEA to set the IRF compliance percentage at 60 percent (the 60 percent rule ) and continue the practice of including comorbidities in the calculation of compliance percentages. We also applied a zero percent market basket increase factor for FY 2009 in accordance with section 115 of the MMSEA. For more information on the policy changes implemented for FY 2009, please refer to the FY 2009 IRF PPS final rule (73 FR 46370), in which we published the final FY 2009 IRF prospective payment rates. In the FY 2010 IRF PPS final rule (74 FR 39762) and in correcting amendments to the FY 2010 IRF PPS final rule (74 FR 50712) that we published on October 1, 2009, we updated the prospective payment rates, the CMG relative weights, the average length of stay values, the rural, LIP, teaching status adjustment factors, and the outlier threshold; implemented new IRF coverage requirements for determining whether an IRF claim is reasonable and necessary; and revised the regulation text to require IRFs to submit patient assessments on Medicare Advantage

16 CMS-1671-F 16 (MA) (formerly called Medicare Part C) patients for use in the 60 percent rule calculations. Any reference to the FY 2010 IRF PPS final rule in this final rule also includes the provisions effective in the correcting amendments. For more information on the policy changes implemented for FY 2010, please refer to the FY 2010 IRF PPS final rule (74 FR and 74 FR 50712), in which we published the final FY 2010 IRF prospective payment rates. After publication of the FY 2010 IRF PPS final rule (74 FR 39762), section 3401(d) of the Patient Protection and Affordable Care Act (Pub. L , enacted on March 23, 2010), as amended by section of the same Act and by section 1105 of the Health Care and Education Reconciliation Act of 2010 (Pub. L , enacted on March 30, 2010) (collectively, hereinafter referred to as PPACA ), amended section 1886(j)(3)(C) of the Act and added section 1886(j)(3)(D) of the Act. Section 1886(j)(3)(C) of the Act requires the Secretary to estimate a multifactor productivity (MFP) adjustment to the market basket increase factor, and to apply other adjustments as defined by the Act. The productivity adjustment applies to FYs from 2012 forward. The other adjustments apply to FYs 2010 to Sections 1886(j)(3)(C)(ii)(II) and 1886(j)(3)(D)(i) of the Act defined the adjustments that were to be applied to the market basket increase factors in FYs 2010 and Under these provisions, the Secretary was required to reduce the market basket increase factor in FY 2010 by a 0.25 percentage point adjustment. Notwithstanding this provision, in accordance with section 3401(p) of the PPACA, the adjusted FY 2010 rate was only to be applied to discharges occurring on or after April 1, Based on the self-implementing legislative changes to section 1886(j)(3) of the Act, we adjusted the FY 2010 federal prospective payment rates as required, and applied these rates to IRF discharges occurring on or after April 1, 2010, and on or before September 30, Thus, the final FY 2010 IRF prospective payment rates that were published in the FY 2010 IRF PPS final rule (74 FR 39762) were used for discharges occurring

17 CMS-1671-F 17 on or after October 1, 2009, and on or before March 31, 2010, and the adjusted FY 2010 IRF prospective payment rates applied to discharges occurring on or after April 1, 2010, and on or before September 30, The adjusted FY 2010 prospective payment rates are available on the CMS website at Payment/InpatientRehabFacPPS/Data-Files.html. In addition, sections 1886(j)(3)(C) and (D) of the Act also affected the FY 2010 IRF outlier threshold amount because they required an adjustment to the FY 2010 RPL market basket increase factor, which changed the standard payment conversion factor for FY Specifically, the original FY 2010 IRF outlier threshold amount was determined based on the original estimated FY 2010 RPL market basket increase factor of 2.5 percent and the standard payment conversion factor of $13,661. However, as adjusted, the IRF prospective payments are based on the adjusted RPL market basket increase factor of 2.25 percent and the revised standard payment conversion factor of $13,627. To maintain estimated outlier payments for FY 2010 equal to the established standard of 3 percent of total estimated IRF PPS payments for FY 2010, we revised the IRF outlier threshold amount for FY 2010 for discharges occurring on or after April 1, 2010, and on or before September 30, The revised IRF outlier threshold amount for FY 2010 was $10,721. Sections 1886(j)(3)(C)(ii)(II) and 1886(j)(3)(D)(i) of the Act also required the Secretary to reduce the market basket increase factor in FY 2011 by a 0.25 percentage point adjustment. The FY 2011 IRF PPS notice (75 FR 42836) and the correcting amendments to the FY 2011 IRF PPS notice (75 FR 70013) described the required adjustments to the FY 2011 and FY 2010 IRF PPS prospective payment rates and outlier threshold amount for IRF discharges occurring on or after April 1, 2010, and on or before September 30, It also updated the FY 2011 prospective payment rates, the CMG relative weights, and the average length of stay values.

18 CMS-1671-F 18 Any reference to the FY 2011 IRF PPS notice in this final rule also includes the provisions effective in the correcting amendments. For more information on the FY 2010 and FY 2011 adjustments or the updates for FY 2011, please refer to the FY 2011 IRF PPS notice (75 FR and 75 FR 70013). In the FY 2012 IRF PPS final rule (76 FR 47836), we updated the IRF prospective payment rates, rebased and revised the RPL market basket, and established a new QRP for IRFs in accordance with section 1886(j)(7) of the Act. We also revised regulation text for the purpose of updating and providing greater clarity. For more information on the policy changes implemented for FY 2012, please refer to the FY 2012 IRF PPS final rule (76 FR 47836), in which we published the final FY 2012 IRF prospective payment rates. The FY 2013 IRF PPS notice (77 FR 44618) described the required adjustments to the FY 2013 prospective payment rates and outlier threshold amount for IRF discharges occurring on or after October 1, 2012, and on or before September 30, It also updated the FY 2013 prospective payment rates, the CMG relative weights, and the average length of stay values. For more information on the updates for FY 2013, please refer to the FY 2013 IRF PPS notice (77 FR 44618). In the FY 2014 IRF PPS final rule (78 FR 47860), we updated the prospective payment rates, the CMG relative weights, and the outlier threshold amount. We also updated the facilitylevel adjustment factors using an enhanced estimation methodology, revised the list of diagnosis codes that count toward an IRF s 60 percent rule compliance calculation to determine presumptive compliance, revised sections of the IRF-PAI, revised requirements for acute care hospitals that have IRF units, clarified the IRF regulation text regarding limitation of review, updated references to previously changed sections in the regulations text, and revised and updated quality measures and reporting requirements under the IRF QRP. For more information

19 CMS-1671-F 19 on the policy changes implemented for FY 2014, please refer to the FY 2014 IRF PPS final rule (78 FR 47860), in which we published the final FY 2014 IRF prospective payment rates. In the FY 2015 IRF PPS final rule (79 FR 45872), we updated the prospective payment rates, the CMG relative weights, and the outlier threshold amount. We also further revised the list of diagnosis codes that count toward an IRF s 60 percent rule compliance calculation to determine presumptive compliance, revised sections of the IRF-PAI, and revised and updated quality measures and reporting requirements under the IRF QRP. For more information on the policy changes implemented for FY 2015, please refer to the FY 2015 IRF PPS final rule (79 FR 45872) and the FY 2015 IRF PPS correction notice (79 FR 59121). In the FY 2016 IRF PPS final rule (80 FR 47036), we updated the prospective payment rates, the CMG relative weights, and the outlier threshold amount. We also adopted an IRFspecific market basket that reflects the cost structures of only IRF providers, a blended one-year transition wage index based on the adoption of new OMB area delineations, a 3-year phase-out of the rural adjustment for certain IRFs due to the new OMB area delineations, and revisions and updates to the IRF QRP. For more information on the policy changes implemented for FY 2016, please refer to the FY 2016 IRF PPS final rule (80 FR 47036). In the FY 2017 IRF PPS final rule (81 FR 52056), we updated the prospective payment rates, the CMG relative weights, and the outlier threshold amount. We also revised and updated quality measures and reporting requirements under the IRF QRP. For more information on the policy changes implemented for FY 2017, please refer to the FY 2017 IRF PPS final rule (81 FR 52056) and the FY 2017 IRF PPS correction notice (81 FR 59901). B. Provisions of the PPACA Affecting the IRF PPS in FY 2012 and Beyond The PPACA included several provisions that affect the IRF PPS in FYs 2012 and beyond. In addition to what was previously discussed, section 3401(d) of the PPACA also added

20 CMS-1671-F 20 section 1886(j)(3)(C)(ii)(I) (providing for a productivity adjustment for fiscal year 2012 and each subsequent fiscal year). The productivity adjustment for FY 2018 is discussed in section VI.B. of this final rule. Section 3401(d) of the PPACA requires an additional 0.75 percentage point adjustment to the IRF increase factor for each of FYs 2017, 2018, and The applicable adjustment for FY 2018 is discussed in section V.B. of this final rule. Section 1886(j)(3)(C)(ii)(II) of the Act notes that the application of these adjustments to the market basket update may result in an update that is less than 0.0 for a fiscal year and in payment rates for a fiscal year being less than such payment rates for the preceding fiscal year. Section 3004(b) of the PPACA also addressed the IRF PPS. It reassigned the previously designated section 1886(j)(7) of the Act to section 1886(j)(8) and inserted a new section 1886(j)(7), which contains requirements for the Secretary to establish a QRP for IRFs. Under that program, data must be submitted in a form and manner and at a time specified by the Secretary. Beginning in FY 2014, section 1886(j)(7)(A)(i) of the Act requires the application of a 2 percentage point reduction of the applicable market basket increase factor for IRFs that fail to comply with the quality data submission requirements. Application of the 2 percentage point reduction may result in an update that is less than 0.0 for a fiscal year and in payment rates for a fiscal year being less than such payment rates for the preceding fiscal year. Reporting-based reductions to the market basket increase factor will not be cumulative; they will only apply for the FY involved. Under section 1886(j)(7)(D)(i) and (ii) of the Act, the Secretary is generally required to select quality measures for the IRF QRP from those that have been endorsed by the consensusbased entity which holds a performance measurement contract under section 1890(a) of the Act. This contract is currently held by the National Quality Forum (NQF). So long as due consideration is given to measures that have been endorsed or adopted by a consensus-based

21 CMS-1671-F 21 organization, section 1886(j)(7)(D)(ii) of the Act authorizes the Secretary to select non-endorsed measures for specified areas or medical topics when there are no feasible or practical endorsed measure(s). Section 1886(j)(7)(E) of the Act requires the Secretary to establish procedures for making the IRF PPS quality reporting data available to the public. In so doing, the Secretary must ensure that IRFs have the opportunity to review any such data prior to its release to the public. C. Operational Overview of the Current IRF PPS As described in the FY 2002 IRF PPS final rule, upon the admission and discharge of a Medicare Part A Fee-for-Service (FFS) patient, the IRF is required to complete the appropriate sections of a patient assessment instrument (PAI), designated as the IRF-PAI. In addition, beginning with IRF discharges occurring on or after October 1, 2009, the IRF is also required to complete the appropriate sections of the IRF-PAI upon the admission and discharge of each MA patient, as described in the FY 2010 IRF PPS final rule. All required data must be electronically encoded into the IRF-PAI software product. Generally, the software product includes patient classification programming called the Grouper software. The Grouper software uses specific IRF-PAI data elements to classify (or group) patients into distinct CMGs and account for the existence of any relevant comorbidities. The Grouper software produces a 5-character CMG number. The first character is an alphabetic character that indicates the comorbidity tier. The last 4 characters are numeric characters that represent the distinct CMG number. Free downloads of the Inpatient Rehabilitation Validation and Entry (IRVEN) software product, including the Grouper software, are available on the CMS website at Payment/InpatientRehabFacPPS/Software.html. Once a Medicare Part A FFS patient is discharged, the IRF submits a Medicare claim as a

22 CMS-1671-F 22 Health Insurance Portability and Accountability Act of 1996 (Pub. L , enacted on August 21, 1996) (HIPAA) compliant electronic claim or, if the Administrative Simplification Compliance Act of 2002 (Pub. L , enacted on December 27, 2002) (ASCA) permits, a paper claim (a UB-04 or a CMS-1450 as appropriate) using the five-character CMG number and sends it to the appropriate Medicare Administrative Contractor (MAC). In addition, once a MA patient is discharged, in accordance with the Medicare Claims Processing Manual, chapter 3, section 20.3 (Pub ), hospitals (including IRFs) must submit an informational-only bill (Type of Bill (TOB) 111), which includes Condition Code 04 to their MAC. This will ensure that the MA days are included in the hospital s Supplemental Security Income (SSI) ratio (used in calculating the IRF LIP adjustment) for fiscal year 2007 and beyond. Claims submitted to Medicare must comply with both ASCA and HIPAA. Section 3 of the ASCA amends section 1862(a) of the Act by adding paragraph (22), which requires the Medicare program, subject to section 1862(h) of the Act, to deny payment under Part A or Part B for any expenses for items or services for which a claim is submitted other than in an electronic form specified by the Secretary. Section 1862(h) of the Act, in turn, provides that the Secretary shall waive such denial in situations in which there is no method available for the submission of claims in an electronic form or the entity submitting the claim is a small provider. In addition, the Secretary also has the authority to waive such denial in such unusual cases as the Secretary finds appropriate. For more information, see the Medicare Program; Electronic Submission of Medicare Claims final rule (70 FR 71008). Our instructions for the limited number of Medicare claims submitted on paper are available at Section 3 of the ASCA operates in the context of the administrative simplification provisions of HIPAA, which include, among others, the requirements for transaction standards

23 CMS-1671-F 23 and code sets codified in 45 CFR, parts 160 and 162, subparts A and I through R (generally known as the Transactions Rule). The Transactions Rule requires covered entities, including covered health care providers, to conduct covered electronic transactions according to the applicable transaction standards. (See the CMS program claim memoranda at and listed in the addenda to the Medicare Intermediary Manual, Part 3, section 3600). The MAC processes the claim through its software system. This software system includes pricing programming called the Pricer software. The Pricer software uses the CMG number, along with other specific claim data elements and provider-specific data, to adjust the IRF s prospective payment for interrupted stays, transfers, short stays, and deaths, and then applies the applicable adjustments to account for the IRF's wage index, percentage of lowincome patients, rural location, and outlier payments. For discharges occurring on or after October 1, 2005, the IRF PPS payment also reflects the teaching status adjustment that became effective as of FY 2006, as discussed in the FY 2006 IRF PPS final rule (70 FR 47880). D. Advancing Health Information Exchange The Department of Health and Human Services (HHS) has a number of initiatives designed to encourage and support the adoption of health information technology and to promote nationwide health information exchange to improve health care. As discussed in the August 2013 Statement Principles and Strategies for Accelerating Health Information Exchange (available at we believe that all individuals, their families, their healthcare and social service providers, and payers should have consistent and timely access to health information in a standardized format that can be securely exchanged between the patient, providers, and others involved in the individual s care. Health information technology (health IT) that facilitates the secure, efficient,

24 CMS-1671-F 24 and effective sharing and use of health-related information when and where it is needed is an important tool for settings across the continuum of care, including inpatient rehabilitation facilities. The effective adoption and use of health information exchange and health IT tools will be essential as IRFs seek to improve quality and lower costs through value-based care. The Office of the National Coordinator for Health Information Technology (ONC) has released a document entitled Connecting Health and Care for the Nation: A Shared Nationwide Interoperability Roadmap (Roadmap) (available at In the near term, the Roadmap focuses on actions that will enable individuals and providers across the care continuum to send, receive, find, and use a common set of electronic clinical information at the nationwide level by the end of The Roadmap s goals also align with the Improving Medicare Post-Acute Care Transformation Act of 2014 (Pub. L , enacted on October 6, 2014) (IMPACT Act), which requires assessment data to be standardized and interoperable to allow for exchange of the data. The Roadmap identifies four critical pathways that health IT stakeholders should focus on now to create a foundation for long-term success: (1) improve technical standards and implementation guidance for priority data domains and associated elements; (2) rapidly shift and align federal, state, and commercial payment policies from FFS to value-based models to stimulate the demand for interoperability; (3) clarify and align federal and state privacy and security requirements that enable interoperability; and (4) align and promote the use of consistent policies and business practices that support interoperability, in coordination with stakeholders. In addition, ONC has released the final version of the 2017 Interoperability Standards Advisory (available at a coordinated catalog of standards and implementation specifications to enable priority health information exchange functions.

25 CMS-1671-F 25 Providers, payers, and vendors are encouraged to take these health IT standards into account as they implement interoperable health information exchange across the continuum of care, including care settings such as inpatient rehabilitation facilities. We encourage stakeholders to utilize health information exchange and certified health IT to effectively and efficiently help providers improve internal care delivery practices, engage patients in their care, support management of care across the continuum, enable the reporting of electronically specified clinical quality measures, and improve efficiencies and reduce unnecessary costs. As adoption of certified health IT increases and interoperability standards continue to mature, HHS will seek to reinforce standards through relevant policies and programs. II. Summary of Provisions of the Proposed Rule In the FY 2018 IRF PPS proposed rule (82 FR 20690), we proposed to update the IRF prospective payment rates for FY 2018, revise the lists of ICD-10-CM diagnosis codes that are used to determine presumptive compliance under the 60 percent rule, remove the 25 percent penalty for IRF-PAI late transmissions, remove the voluntary swallowing status item (Item 27) from the IRF-PAI, provide for a subregulatory process for certain annual updates to the presumptive methodology diagnosis code lists, use height/weight items from the IRF-PAI to determine patient BMI greater than 50 for cases of lower extremity single-joint replacement under the presumptive methodology, and revise and update measures and reporting requirements under the IRF QRP. We also solicited comments regarding the criteria used to classify facilities for payment under the IRF PPS. The proposed updates to the IRF prospective payment rates for FY 2018 were as follows: Update the FY 2018 IRF PPS relative weights and average length of stay values using the most current and complete Medicare claims and cost report data in a budget-neutral manner, as discussed in section III. of the FY 2018 IRF PPS proposed rule (82 FR 20690, through

26 CMS-1671-F ). Describe the continued use of FY 2014 facility-level adjustment factors, as discussed in section IV. of the FY 2018 IRF PPS proposed rule (82 FR 20690, through 20700). Update the FY 2018 IRF PPS payment rates by the proposed market basket increase factor, as required by section 1886(j)(3)(C)(iii) of the Act, as described in section V. of the FY 2018 IRF PPS proposed rule (82 FR at 20700). Update the FY 2018 IRF PPS payment rates by the FY 2018 wage index and the labor-related share in a budget-neutral manner, as discussed in section V. of the FY 2018 IRF PPS proposed rule (82 FR 20690, through 20703). Describe the calculation of the IRF standard payment conversion factor for FY 2018, as discussed in section V. of the FY 2018 IRF PPS proposed rule (82 FR 20690, through 20705). Update the outlier threshold amount for FY 2018, as discussed in section VI. of the FY 2018 IRF PPS proposed rule (82 FR 20690, through 20706). Update the cost-to-charge ratio (CCR) ceiling and urban/rural average CCRs for FY 2018, as discussed in section VI. of the FY 2018 IRF PPS proposed rule (82 FR at 20706). Describe the proposed removal of the 25 percent payment penalty for IRF-PAI late transmissions, as discussed in section VII. of the FY 2018 IRF PPS proposed rule (82 FR 20690, through 20707). Describe proposed revisions to the IRF-PAI to remove the voluntary swallowing status item, as discussed in section VIII. of the FY 2018 IRF PPS proposed rule (82 FR at 20707). Describe proposed refinements to the presumptive compliance methodology

27 CMS-1671-F 27 ICD-10-CM diagnosis codes, as discussed in section IX. of the FY 2018 IRF PPS proposed rule (82 FR 20690, through 20711). Solicit comments regarding the criteria used to classify facilities for payment under the IRF PPS, as discussed in section IX. of the FY 2018 IRF PPS proposed rule (82 FR at 20712). Describe the proposed subregulatory process for certain annual updates to the presumptive methodology diagnosis code lists, as discussed in section X. of the FY 2018 IRF PPS proposed rule (82 FR 20690, through 20714). Describe the proposed use of height/weight items on the IRF-PAI to determine patient BMI greater than 50 for cases of lower extremity single joint replacement under the presumptive methodology, as discussed in section XI. of the FY 2018 IRF PPS proposed rule (82 FR at 20714). Describe proposed revisions and updates to quality measures and reporting requirements under the IRF QRP in accordance with section 1886(j)(7), which in part requires IRFs to report certain data specified under section 1899B of the Act, as discussed in section XII. of the FY 2018 IRF PPS proposed rule (82 FR 20690, through 20742). III. Analysis and Responses to Public Comments We received 76 timely responses from the public, many of which contained multiple comments on the FY 2018 IRF PPS proposed rule (82 FR 20690). We received comments from various trade associations, inpatient rehabilitation facilities, individual physicians, therapists, clinicians, health care industry organizations, and health care consulting firms. The following sections, arranged by subject area, include a summary of the public comments that we received, and our responses. IV. Update to the Case-Mix Group (CMG) Relative Weights and Average Length of Stay

28 CMS-1671-F 28 Values for FY 2018 As specified in (b)(1), we calculate a relative weight for each CMG that is proportional to the resources needed by an average inpatient rehabilitation case in that CMG. For example, cases in a CMG with a relative weight of 2, on average, will cost twice as much as cases in a CMG with a relative weight of 1. Relative weights account for the variance in cost per discharge due to the variance in resource utilization among the payment groups, and their use helps to ensure that IRF PPS payments support beneficiary access to care, as well as provider efficiency. In the FY 2018 IRF PPS proposed rule (82 FR 20690, through 20699), we proposed to update the CMG relative weights and average length of stay values for FY As required by statute, we always use the most recent available data to update the CMG relative weights and average lengths of stay. For FY 2018, we proposed to use the FY 2016 IRF claims and FY 2015 IRF cost report data. These data are the most current and complete data available at this time. We note that, as we typically do, we updated our data between the FY 2018 IRF PPS proposed and final rules to ensure that we use the most recent available data in calculating IRF PPS payments. This updated data reflects a more complete set of claims for FY 2016 and additional cost report data for FY In the FY 2018 IRF PPS proposed rule, we proposed to apply these data using the same methodologies that we have used to update the CMG relative weights and average length of stay values each fiscal year since we implemented an update to the methodology to use the more detailed CCR data from the cost reports of IRF subprovider units of primary acute care hospitals, instead of CCR data from the associated primary care hospitals, to calculate IRFs average costs per case, as discussed in the FY 2009 IRF PPS final rule (73 FR 46372). In calculating the CMG relative weights, we use a hospital-specific relative value method to estimate operating (routine

29 CMS-1671-F 29 and ancillary services) and capital costs of IRFs. The process used to calculate the CMG relative weights for this final rule is as follows: Step 1. We estimate the effects that comorbidities have on costs. Step 2. We adjust the cost of each Medicare discharge (case) to reflect the effects found in the first step. Step 3. We use the adjusted costs from the second step to calculate CMG relative weights, using the hospital-specific relative value method. Step 4. We normalize the FY 2018 CMG relative weights to the same average CMG relative weight from the CMG relative weights implemented in the FY 2017 IRF PPS final rule (81 FR 52056). Consistent with the methodology that we have used to update the IRF classification system in each instance in the past, we proposed to update the CMG relative weights for FY 2018 in such a way that total estimated aggregate payments to IRFs for FY 2018 are the same with or without the changes (that is, in a budget-neutral manner) by applying a budget neutrality factor to the standard payment amount. To calculate the appropriate budget neutrality factor for use in updating the FY 2018 CMG relative weights, we use the following steps: Step 1. Calculate the estimated total amount of IRF PPS payments for FY 2018 (with no changes to the CMG relative weights). Step 2. Calculate the estimated total amount of IRF PPS payments for FY 2018 by applying the changes to the CMG relative weights (as discussed in this final rule). Step 3. Divide the amount calculated in step 1 by the amount calculated in step 2 to determine the budget neutrality factor (0.9976) that would maintain the same total estimated aggregate payments in FY 2018 with and without the changes to the CMG relative weights. Step 4. Apply the budget neutrality factor (0.9976) to the FY 2017 IRF PPS standard